Debt Free Tristan on 09 Jun 2008 04:43 pm
How To Get Out Of Debt
I come across lots of people who are in debt, and they are usually looking for me to give them ideas on how to get out of debt.
So if you do have debt, how do you get out of debt? It’s not easy, for most people, the reason they have got into debt is because they have over-spent. This is usually because they have not properly budgeted each month.
How do you budget? You create yourself a spreadsheet, at the top you put in your after tax monthly income, then beneath it, you put in a description of every known monthly cost you have (mortgage, utilities, debts, food, petrol etc), with the amount next to it. At the bottom, you need a subtotal for all of your monthly expenditure. Lastly, you need to have a line called disposable income, which is remainder of the after tax income with the outgoings subtotal subtracted from it.
Once you have your monthly disposable income worked out, you need to work out how much that is each week, and then make sure that you don’t spend more than that each week. If you can be disciplined and live within the amount you have budgeted for, then you will be able to get yourself out of debt.
If you don’t have any disposable income, perhaps the debts and all your other monthly outgoings are greater than your income, you need to consider some fairly drastic action as a deficit each month will just exacerbate the problem.
I will post another article tomorrow on some solutions to debt problems that are spiralling out of control.
on 09 Jun 2008 at 6:31 pm 1.Vered said …
These are great tips.
No doubt, discipline is a huge part of being able to get out of debt.
on 10 Jun 2008 at 10:57 am 2.Tristan said …
Discipline is the key. Another useful tip that I have done myself, is to have two distinct bank accounts, one for spending money, the other for direct debits and standing orders. I will write a more detailed article on that subject in the future…
on 11 Jun 2008 at 7:22 pm 3.John said …
I’d also suggest immediately using around 50% of the disposable income to start paying off more of the debt (assuming the benefit of doing so outweighs the penalties of early repayment).
on 16 Jun 2008 at 1:38 pm 4.The Carnival of Twenty Something Finances » Poorer Than You said …
[...] How To Get Out Of Debt posted at Find Financial Freedom. [...]
on 27 Jun 2008 at 8:19 pm 5.karla (threadbndr) said …
Tristan - great strategy!
Also don’t forget to make “Save” one of those “required” lines at the top. Pay yourself first.